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With a sigh of relief that may have been audible across all of Calgary on the morning of August 30, 2018, shareholders in Kinder Morgan Canada approved the sale of the Trans Mountain Pipeline and its planned expansion to the federal government for $4.5 billion. Almost simultaneously, the Federal Court of Appeal released an unanimous ruling that quashed the environmental assessment of the expansion project, effectively undoing much of what has happened with the project since 2013.

The federal government’s offer to purchase the pipeline came after Kinder Morgan threatened to throw in the towel on the project, citing unacceptable delays and rising costs. The Federal Court of Appeal decision effectively ensures that delays will continue and costs will mount. It leaves open the very real possibility that the expansion will never be built, making the federal government the owner of a very expensive 65-year-old pipeline.

Interestingly, the Federal Court of Appeal found that the National Energy Board’s review process was sound. The flaw was in the execution of that process.

The case pitted the cities of Vancouver and Burnaby and several First Nations against the federal government, the National Energy Board and Trans Mountain Pipeline. The appeal was a consolidation of several actions that challenged the National Energy Board’s recommendation that the project be approved, and Cabinet’s subsequent order-in-council accepting that recommendation.

The court’s lengthy decision found two important flaws in the National Energy Board’s environmental review: it fell short of the requirement for meaningful consultation with Indigenous peoples, and it erroneously excluded project-related tanker traffic from the project’s definition. As a result, the National Energy Board was able to overlook the acknowledged impact that project-related tanker traffic would have on the Southern Resident Killer Whale population.

The federal government did commit to deeper consultations with First Nations following the Liberal Party’s 2015 election victory. The Interim Measures for Pipeline Reviews were announced in January 2016 and promised that “Indigenous peoples will be meaningfully consulted, and where appropriate, impacts on their rights and interests will be accommodated.” As one part of that process, the government struck a ministerial panel to seek additional input from First Nations and others. However, this effort was considered separate from the Crown’s duty to consult, and was not considered by the court when arriving at its decision.

The Federal Court of Appeal’s ruling has quashed Cabinet’s certificate of public convenience and necessity, which approved construction of the project, and says Cabinet must refer the project back to the National Energy Board for reconsideration, paying particular attention to the place of project-related tanker traffic in the project’s definition and to the depth of consultation between Canada and affected First Nations.

At press time, the federal government had not determined whether it would seek leave to appeal the decision to the Supreme Court of Canada.